A business strategy for a bright future
12 JUL 2018
Digitalization, urbanization, industry 4.0, the Internet of Things, and even new forms of mobility are fundamentally transforming our society, our economy and global markets.
A transformation program for the next five years
Companies face the threat of missing out on a key trend and ending up stuck out in left field. Therefore, we at Merck KGaA, Darmstadt, Germany are continually examining whether and how we need to adapt our strategy so that we can remain successful in two, five and even ten years from now.
In Electronics, the business sector for the specialty chemicals business of Merck KGaA, Darmstadt, Germany, we recently updated our strategic direction. The transformation program called “Bright Future” covers a five-year period. In response to digital change, we intend to focus even more strongly in the future on the fast-growing electronics market, which we serve with specialty chemicals for the manufacture of semiconductors and displays.
Above all, the business with materials for the semiconductor industry will play an even more important role in the future with our new strategy. This is how we want to further expand our position as a leading supplier of solutions for the electronics industry and digital applications. We will more than offset the expected decline in the Liquid Crystals business by achieving growth in our other businesses. This includes our business with semiconductor materials, OLED materials and photoresists, as well as our pigments business. The aim is to achieve by 2020 average annual sales growth of 2% to 3%, along with a margin of around 30%, which is still above-average in our industry.
Focus on semiconductors as a stable market of the future
In contrast to many other companies, we don’t see current megatrends as a threat, but rather as an opportunity for our business model. We want to make targeted use of digitalization by having the right product portfolio. The common denominator of the digitalization, urbanization, industry 4.0 and mobility trends is that they are based on the development of ever more powerful digital technologies and depend on state-of-the-art computer chips.
The most important components for manufacturing computer chips are semiconductors – tiny solid-state parts whose electrical conductivity can be regulated. And that’s where Electronics comes into the picture. Merck KGaA, Darmstadt, Germany is one of the world’s leading suppliers of specialty chemicals for semiconductor production.
The global semiconductor market has a volume of € 380 billion, and megatrends, above all digitalization, will further increase the market volume. For the coming years, growth rates are expected to be around 5%. There’s another aspect that supports our decision to focus even more strongly on the needs of this important market of the future. The electronics industry serves very heterogeneous end-user markets. Whether in telecommunications, automotive, consumer electronics or industrial machinery, more and more applications are becoming digital – and therefore need semiconductors. Owing to this diversity, the sector is less susceptible to the volatility of individual markets, thus enabling us to plan for the future with a high degree of certainty.
Trends towards miniaturization
The demand for ever smaller and more powerful computer chips is increasing across all markets. It’s easy to imagine: for tasks that you had to do a few years ago at home on your home computer you can now easily use the smartwatch on your wrist. This technically sophisticated development towards “ever smaller, ever faster” is set to continue.
The magic work is called miniaturization. With each new processor generation, chip manufacturers try to accommodate even greater performance on an even smaller space. So far with success. Intel co-founder Gordon Moore even created a formula for this development, according to which the number of transistors installed in a computer chip per unit area doubles every 12 to 24 months.
The fact that Moore’s law is still valid is also due to the continuous development work by EMD Electronics. With our semiconductor materials, we are enabling the manufacture of increasingly smaller, more powerful and energy-efficient computer chips amid declining production costs.
Clearly aligning the entire portfolio
Our Display Solutions and Surface Solutions business units also play an important role in the future of Electronics. For instance, we will adapt our liquid crystals business, which for many years was our guarantee of good profits and healthy margins, to the new conditions in the market. Going forward, earnings and not growth will be in the foreground. In addition, we want to concentrate on our existing customers and focus more closely on their needs and wishes. It’s why we’re also expanding capacities and application laboratories, specifically in China. We want to continue to grow in the organic light-emitting diode business, where the market is also expanding. Here too we are investing more heavily in research and development. The same applies to the business with photoresists, in which we are the market leader.
In Surface Solutions, where we are developing pigment products to upgrade and enhance automotive coatings, printing inks and cosmetics, for instance, we have a stable foundation that will continue to grow in line with rising personal incomes around the world. Here we continue to focus on our closeness to customers and are using intelligent life cycle management to market our products.
Focusing on strengths
I am convinced that our new strategy will make our business sector, which already has a very strong foundation, even more robust and fit for the digital future. We will resolutely use our strengths such as customer proximity, customized solutions, speed and high quality. By focusing on the electronics market, particularly in our Semiconductor Solutions business unit, expanding our growth in China, and applying our resources with agility within our superb portfolio, we will fully unlock our potential. The Electronics business sector has a very bright future.